Q3 2025 Power Corp of Canada Earnings Call
Speaker #1: Good morning, ladies and gentlemen, and welcome to the Power Corp third quarter 2025 earnings conference call. At this time, all lines are in listen-only mode.
Speaker #1: Following the presentation, we will conduct a question and answer session. Analysts who wish to join the question queue may press star then one on their telephone keypad.
Speaker #1: If at any point during the discussion you are having difficulty hearing, please press star then zero on the operator assistance at any time. I would now like to remind you that this call is being recorded on Thursday, November the 13th, 2025.
Speaker #1: I would now like to turn the conference over to Stephen Hung. Head of Investor Relations
Speaker #1: ahead, sir. Thank
Speaker #2: you, operator. Good morning, everyone, and thank you for joining our third quarter financial results call. Before we start, please note that a link to our live webcast and materials for this call have been posted to our website, apowercorporation.com, under the shareholder reports tab.
Speaker #2: Also, Power Corporation released a new financial supplementary package that can be found on our website as well. Please turn to slide two. I would like to draw your attention to the cautionary note regarding the use of forward-looking statements, which form part of today's remarks.
Speaker #2: Please also refer to slide three for a note on the use of non-IFRS financial measures, and clarifications on adjusted net asset value. To discuss our results today, joining us are President and CEO Jeffrey Orr, and our EVP and CFO Jake that, I'll turn the call over to Lawrence.
Speaker #2: remarks, followed by Q&A.
Speaker #3: Okay. Thank you, Steve.
Speaker #3: results from the latest
Speaker #3: quarter. Very strong quarter for power and the whole group, With We will begin with opening display here: strong earnings growth from us this morning to discuss the the companies, value our strategic investments, both at power and at IGM, and then very strong cash flow and buildup of our cash positions.
Speaker #3: elements of what we're doing I think on clear display this So all quarter. From an earnings point of view, it was a very creation on evidence from clean quarter.
Speaker #3: Obviously, it was good strong. You know, very, very positive environment, which we operate, but notwithstanding that, I think it demonstrated the earnings power of both the Great West Life and IGM's earnings-driven businesses and, you know, a fundamentally those businesses are conditions.
Speaker #3: They're in good shape. They continue to build their businesses. But they also earn, and in a clean quarter, it was really demonstrating what kind of earnings power has been created. Markets were there.
Speaker #3: On the value creation from the strategic investment side of this, I said both power and IGM have portfolios of companies that are much higher growth, and that are basically valued more on NAV than earnings, and in this quarter two of those companies announced transactions that will simple and Rockefeller transactions that demonstrated not just the quality but the magnitude of the value creation that can be created in that part of the portfolio.
Speaker #3: from a cash flow point of view, a strong And finally, we've returned a lot of capital. That's an element of our share repurchases on the back strategy as well, and we stepped up our of a strong cash flow coming into the company including from the Great West Life buyback, which we started to participate in, and notwithstanding the pickup in the buyback activity, y, the cash position of Power Corp had quite a material jump over the quarter.
Speaker #3: So then I'll just flip forward to page seven. And just talk a little bit transactions that were announced this about the two fall. So Rockefeller, as I think you're well aware, was an investment that was made, I think it was in the spring of 2023, some nine quarters or so ago.
Speaker #3: U.S. dollars, IGM invested in $835 million, as you see at the bottom of the left-hand page there. In $620 million Canadian dollars, so Rockefeller welcomed a group of new shareholders into the capital stack; family is, in effect, the Chanel family.
Speaker #3: It is their the Chanel company, basically. The Wertheimer and those are all kind of prominent family and the Helbrons run investors. Moose office. Progeny is the Hemingway family from the West Coast of the US, and Abrams Capital is out of Boston.
Speaker #3: So they join Viking, and the effect, IGM, the Demora family, if Moose. That's their family control here. So you've got a group Rockefeller family, and in wealthy families that are in you want to put it from an ultimate behind what's going on at Rockefeller, but very significant jump in value is the main point here I want to make.
Speaker #3: You can see in the bottom of the page, for IGM. And then WellSimple continues to experience tremendous growth. They crossed recently $100 billion continue to really grow their franchise, grow the number of clients, they're just succeeding on all fronts at this point.
Speaker #3: They had an announced a very successful financing round that was led by GIC and Dragoneer, to obviously very credible investors, but also included some very other prominent investors in assets.
Speaker #3: that you can see at the bottom of And the right-hand side there. And our group power and IGM of the 550 treasury. And then once again, at the bottom right, you see the value creation, power has got its own investment, and then across the group, including IGM, principally you can see the value pickup from just the last quarter.
Speaker #3: We had marked it up last quarter but then this financing was done at an even higher mark. So nice to see those two transactions validating the value creation that we see in our investments.
Speaker #3: Page eight, I portfolio. Of a strategic won't I won't really go through. It's just kind of a summary of financial, how we've done, and with that, I'm going to pass the microphone over to.
Speaker #4: Great. Thanks, Jeff. And good morning to everyone joining us. I'm going to begin my remarks on slide 10. As Jeff just commented, we're pleased to report strong results for the third quarter of 2025.
Speaker #4: Our adjusted net earnings from continuing operations were $863 million, and that's an increase of 25% year over year. When we look at the results on a per share basis, Q3 adjusted net earnings were $1.35, up 26% from last year, and the slight uptick versus the overall earnings reflects our buyback activity.
Speaker #4: Before turning to the operating company results, I just want to remind everyone that our ownership in WellSimple across the Power Complex is consolidated at Powers Corporation level.
Speaker #4: And therefore, the fair value increase in WellSimple will not appear in our P&L results. Now moving to our operating company results and beginning with Great West.
Speaker #4: Whose contribution to power is adjusted net earnings was up 16% year over year. The positive results were supported by Great West's six consecutive quarters of base earnings in excess of $1 billion.
Speaker #4: And business, Europe, and really notably a strong quarter in the capital and risk solutions business. IGM's contribution to Power's adjusted earnings was up 23% year over year.
Speaker #4: As we saw strong growth in IG Wealth and McKinsey net flows, the quarter ended with record high AUM and AUA, which were up 14% year over year and increased 7% quarter over quarter.
Speaker #4: The results also saw strong earnings contributions from China AMC, while Rockefeller, which Jeff just spoke to, had positive earnings in the quarter. Slightly offsetting these results this quarter was GBL's contribution to Power's adjusted net earnings, which was a loss of $11 million.
Speaker #4: The lower contribution in the quarter was due to a fair value loss at GBL Capital, as well as higher operating expenses and lower gains on disposals of investments.
Speaker #4: Last week, GBL also announced a significant divestment of its GBL Capital portfolio, and the net earnings of the quarter reflect the estimated transaction value on their assets.
Speaker #4: Moving to our alternative investment platform, Cigar's contribution this quarter was a loss of $11 million. It was down from positive earnings of $106 million last quarter.
Speaker #4: The decrease was primarily driven by higher carried interest expense, associated with the fair value increase at WellSimple. As well as the impact of acquiring the remaining economic interest in performance equity management, which they increased up to 100%.
Speaker #4: Power's sustainable reported an improved contribution driven by lower net carried interest expense, as well as lower acquisition costs. Looking at our corporate operations and other segment, we reported an improved contribution, and that was driven primarily by the positive impact of FX gains relating to foreign currency translation on cash balances.
Speaker #4: Meanwhile, operating expenses were higher due to an increase in long-term compensation expenses, and some increased advisory fees. Overall, we are pleased with our group's strong third quarter results and expect continued momentum to end the fiscal year in next page, slide 11.
Speaker #4: Q4. Turning to the Looking at our net asset value, we reported net asset value per share of $72.24 as of September 30th, 2025. I want to remind the group that 83% of our power's gross asset value continues to be driven by our earnings-based businesses, specifically Great West and IGM.
Speaker #4: Second, during the quarter, we experienced strong 25% compared to the same period last year, adjusted NAV growth, which was up and up 12% to the prior quarter.
Speaker #4: Driving that change were increases at all of our publicly reported operating companies, with IGM up 22%, while GBL 25%, followed by Great West rose 18%.
Speaker #4: The net asset value of Cigar increased 40% year over year, and that was driven by the fair value increase in WellSimple I've mentioned. Meanwhile, power's sustainable saw a slight reduction in NAV, and that's related to some asset sales that we announced earlier this year that generated cash for the corporation.
Speaker #4: On our cash balance, we ended the quarter at $1.9 billion, we see about $1.5 billion paid and dividends we've yet to available when we factor in dividends to be receive.
Speaker #4: And as many will have seen, we remained active in our NCIV program during the quarter we repurchased 3 million shares worth about $170 million, and to date we've purchased 7.4 million shares.
Speaker #4: We continue to be well positioned to deliver a strong return of capital, as Jeff noted upfront. And year to date, to October 31st, we've returned over $2 billion to shareholders through a combination of share buybacks and dividends.
Speaker #4: With that, Jeff, I'll turn it back to you. Okay, Jake. Thank you. So I will move us forward to page 13. Just a couple of comments about Great West Life.
Speaker #4: They continue to meet or exceed the announced. Objectives that they announced several years medium term objectives that they ago. And continue to have growth.
Speaker #4: I thought it was really pleased to see and Jake mentioned it was strong earnings geographies, and as well a few look at it from a business segment point of view.
Speaker #4: Retirement, wealth asset management, across virtually all the insurance, et cetera, as you look through the different components board. And it was also of it, it was strong across the coupled with very high cash generation.
Speaker #4: Mentioned before that Great West Life is doing very clear as to how the earnings in each of those areas turn into cash generation. And then you're seeing that at the top of the house as the cash continues to build up the Great West Life co-level.
Speaker #4: So, the company announced and then came up with recent announcements that they're increasing and extending the buyback programs. As you know, Power Corp has decided to participate pro rata in those buybacks now.
Speaker #4: So just all again a buyback earlier this year, good news across Great West, really great momentum in the businesses. IGM as well then turning to page 14.
Speaker #4: Jake mentioned strong AUA and AUM growth. You know, it's markets, but it's also flows. It was really nice to see that both IG wealth and McKinsey had very strong flows and those earnings are also turning into strong cash positions financial position of IGM cash position continues to increased their buyback activity as well as a grow and they have consequence.
Speaker #4: So the earnings businesses here really, really doing page 15 and just well. on the strategic investment I'll just turn you to portfolio of IG.
Speaker #4: It is there are four businesses there. They're very high quality businesses and they're growing very strongly. I talked about WellSimple and Rockefeller. Earlier, you see just there the year-over-year growth in AUA and in client assets at the two franchises.
Speaker #4: But on the asset management side as well, China AMC is growing its assets strongly. They're growing their market share. The company's doing extremely well.
Speaker #4: That's been against the backdrop of mandated feed decreases. So the earnings haven't kept pace, but the earnings have been growing in a in spite of And so but the health of the business, those fee drops.
Speaker #4: business continues to be extremely strong. And the growth of the business, and the position of the difficult fundraising environment for alt managers doing a really nice job in building up their AUM with some very strong fundraising and performance year over year.
Speaker #4: So, we have a very high-quality portfolio. While it is not currently contributing significantly to IGM's net earnings, over time, as these businesses continue to grow and mature, we have four very strong quality businesses that we hope and expect will start to contribute earnings in the years ahead.
Speaker #4: As they get to being in a more mature state. Okay, a couple of comments on GBL then on page 16. We did have mentioned that new CEO was announced in the spring, Johannes Hutt and he has come in and got very strong very strong track record in his time with KKR.
Speaker #4: Where he was there for, I think it was 25 years. The basic strategy is the same, which is ultimately to rotate out of the public portfolio over time and then with the proceeds that would come from that combine with an increased focus on private investments and coupled with a return on capital.
Speaker #4: The return on capital being evidenced through the strong increase in the dividend that they announced earlier this year, as well as strong buyback activities.
Speaker #4: The has Jake mentioned as Johannes and the team have focused on the private capital there is in GBL capital a portfolio of investments in other people's funds that was part of the previous strategy.
Speaker #4: And the decision was made that that was not strategic so the transaction that Jake mentioned was a billion seven trillion a trillion, that would be nice, a euros that was disposed of at about a 9% discount when you do secondaries in this in private alts you're typically discounting them.
Speaker #4: That was actually a pretty good price; a 9% discount was not a big discount. They went out and announced a series of transactions with different buyers and disposed of a big chunk of that GBL portfolio in other people's funds.
Speaker #4: So, a good move and more capital coming into GBL. So, good lots of activity there. We'll continue to watch GBL with interest under the new leadership.
Speaker #4: And then a couple of words on the alternative platforms at Power. Ongoing fundraising on page 17 of $2 billion since we last spoke. So, continued good progress there. And you've got on this page the overall AUM in Canadian dollars: we've got $49 billion committed capital, of which $39 billion is funded.
Speaker #4: And what I really want to do then is turn to page 18 and talk about Cigar who continue to use in addition to fundraising strategic transactions, acquisitions, partnerships to build their franchise.
Speaker #4: And they announced in September the unit gestion acquisition, as well as what Jake mentioned: buying a minority interest in Performance Equity Management. So what they've done here is they've created, under one umbrella, a solutions business, if I can put it that way.
Speaker #4: It's alternative private equities that are focused on primary equity positions secondaries co-investments and effectively mix all that and come up with asset solutions for different client bases.
Speaker #4: Be they retail, family offices, institutional investors that are looking for portfolios. So this part of the business is really thinking of it as putting together packages of alternative assets for different parts of the market.
Speaker #4: And I guess somewhat analogous if you want in the public space to multi-asset type products versus individual fund sleeves. Think of it that way.
Speaker #4: And they've combined this under one business, and it's got $23 billion of investments. It's focused primarily on the mid-market, as opposed to the larger market.
Speaker #4: And they now have capabilities both investment and distribution across North America and Europe. And so it's a whole new area for Cigar and quite an exciting development that they have done.
Speaker #4: In addition, they did announce as well a strategic partnership with Baird. It may not be known to all of you, but Baird is a significant US wealth manager over 500 billion in US in client assets and they're looking for more alts.
Speaker #4: partnership, took a 5% interest in And so they entered into a Cigar and they're going to work on products with Cigar to bring into their retail and wealth channels.
Speaker #4: So a lot's happening at our platforms. Page 19 continued to I mentioned earlier he just see here a return of capital to shareholders over the last several years and I think the on the right-hand side you see the increased buyback activity up to the end of October.
Speaker #4: Pleased to see the discount narrowing; we can always get into a good discussion. I suspect we will continue to have discussions about the discount. We're just very pleased to see that there's, I think, increased recognition on behalf of investors as to what we have across the portfolio and how we can drive value from all the different components of our portfolio as well.
Speaker #4: I suspect some of that but who knows you'll maybe tell me some of that is also a reflection of strong cash flow we have and some of the buyback activity that we are doing.
Speaker #4: You've got on page 21 the returns that we've generated over a various periods. Going back to the last year three years five years and roughly since we announced the reorganization a couple of weeks after that at the end of 2009.
Speaker #4: So we're pleased to see strong performance. I would not expect to see 55% TSRs every year. That's a reflection of a number of factors in the last year but we but we do think we can create if we execute on our strategy mid-teen type returns over time.
Speaker #4: That would be our objective. And then finally as I roll up on the last slide here on 22 just again to summarize a really strong quarter kind of everything working well very clean.
Speaker #4: There wasn't a lot of noise in the quarter, but also good markets and interest rates cooperating. It was just a good quarter where everything worked well.
Speaker #4: Not every quarter is going to be as clean as that. Markets go up and go down and that's fine. From our perspective it's fun to enjoy a quarter where everything is working well but it doesn't change anything that we're doing.
Speaker #4: We're just executing the same strategy we have been for the last several years. I take quick frankly more satisfaction in just seeing the continued progress of the businesses across Great West Life.
Speaker #4: At IGM, the progress they're making and that steady progress—not, you know, up one quarter, down one quarter—it's just pleased with the steady strengthening of our franchises. The management teams are in great shape, and then I look to the rest of the portfolio, the strategic portfolio, the NEV portfolio we sometimes call it, and continued strong progress.
Speaker #4: So, you know, great quarter. We'll enjoy it when everything's working, but everybody's just got their heads down here and continues to execute on what we've been telling you for the last several years.
Speaker #4: So with that I will end my comments and operator you're you can open up the mics or the call to questions.
Speaker #2: We will now begin the question and answer session. To join the question queue you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request.
Speaker #2: If you're using a speakerphone please pick up your handset before pressing any keys. To withdraw your question please press star then two. We'll pause for a moment as callers join the queue.
Speaker #2: Our first question is from Graham Ryding with TD Securities. Please go
Speaker #2: ahead. Hi good
Speaker #3: Morning. Can you just confirm the alts AUM growth of $2 million in the quarter? Was that due to fundraising or was that market-related?
Speaker #3: performance?
Speaker #4: That is
Speaker #4: fundraising and that is committed well simple as well thank you. Okay I was about to say it was all fundraising Graham and I got a hook here from Jake so that includes the some of the market increase in the well simple position as well.
Speaker #3: It's a combination of both Graham the well simple increase we've obviously shown and then the net position would be from fundraising primarily. Okay so half and half
Speaker #3: roughly? Probably a bit more towards well
Speaker #4: simple and then the rest towards
Speaker #4: fundraising. Okay.
Speaker #3: Okay. Thanks for that. The 5% stake from Baird into Cigar I think you've done something similar in the past. Did they put in actual capital here or is this a commitment for a certain level of AUM?
Speaker #3: How does that sort of structure look?
Speaker #4: They They put capital in and I won't go into all the details but there are some adjustments to what the ultimate position can be based on distribution performance on their shelves.
Speaker #4: But they put capital in at the full value the current value for the
Speaker #4: 5%. Okay
Speaker #3: great and then maybe what's your ownership stake net going forward in Cigar and then can you give an update on the AUM growth and the flows that you've seen from other wealth channel partnerships that you've done done in the past?
Speaker #3: I think you did something similar with BMO last year just maybe an update on any traction from flows from those sort of wealth partnerships.
Speaker #4: Our equity position in Cigar is at about 45% right now following these transactions. And I don't have in front of of the flows that have come through retail channels.
Speaker #4: We can try and pull that information together but I'd be misleading you or I don't have the numbers in front of me. I think what you will see though because it's not just at Cigar I'm going to broaden your question out Graham.
Speaker #4: We've got activity going on for example at IGM. Where IGM has got Northleaf and they're also working with other parts of the alt platforms across power and other suppliers.
Speaker #4: And there have been McKinsey doing retail funds, and IGM is putting alts into their different shelf programs. You've obviously got Empower looking at it.
Speaker #4: Across the group you've got the phenomenon that's happening in the industry where you're taking alts and putting them into retail products and high net worth products.
Speaker #4: And they tend to go through a long period where not a lot of flows happen. You're putting structures together. You're educating advisors. You're getting on shelves.
Speaker #4: You're going through the different control mechanisms on different wealth platforms to get on. There's kind of a long lead time and then the sales start to pick up and then at a certain point the hope is they take off.
Speaker #4: And we're starting to see that. So the meaning the numbers I think if you added it all up I'm just foretelling because I've seen the numbers all in pieces.
Speaker #4: I haven't kind of seen them all together in one spot. I don't think they're hugely material at this point but the growth of them is really starting to accelerate.
Speaker #4: So I'm foretelling what I think the story is but we'll try and figure out whether we can pull together some numbers for you and for others obviously.
Speaker #4: We'll disclose it to everyone. And then
Speaker #4: you'd add to that? Yeah Jamie the only thing I'd add on
Speaker #3: is we expect that trend to continue. We're seeing good coordination across the group with Cigar's credit product and well simple. We've also seen access to the Empower shelf or at least announcement that Cigar will ultimately be going on that.
Speaker #3: So we do think retail funds will be a big component of growth moving forward. Okay great that's it for me. Maybe I'll re-cue. Thank you.
Speaker #4: Okay thanks Graham.
Speaker #2: The next question is from James Gloin with National Bank Capital Markets. Please go ahead.
Speaker #4: Yeah thanks first question just a refresh on the dividend strategy. Obviously a great year this year from an earnings growth perspective and cash flows.
Speaker #4: How should we be thinking about that dividend? You know I guess maybe in the next quarter. And obviously how does share repurchases factor into that capital allocation decision as well.
Speaker #3: Thank you good question Jamie. So what we do typically the fall is where Great West Life and IGM would go through their 2026 budgeting process.
Speaker #3: Get a good handle on where they think they're going. They will then come and come to the boards in early February or mid-February when we have the Q4 results.
Speaker #3: And would recommend a dividends. Levels for 2026. Power then takes that looks at those two dividends as the two kind of steady sources of cash flow.
Speaker #3: And we then look at our expenses what our net cash flow will be from those dividends and set our dividend as a consequence of having that information.
Speaker #3: Other sources of cash that we might get from either disposing of an alts position or getting returns or cash flow from our alts positions or participating in buybacks that Great West Life may be having or other sources of cash.
Speaker #3: Occasionally we do some fundraising. We recently did some preferred shares that market opened. You know those what I would call more episodic sources of cash are what fund our buyback programs.
Speaker #3: And then we look at that cash in the context of investments we might have committed to or other opportunities. And we set our buybacks in the context of that cash position.
Speaker #3: I don't know if that explained it. We look to the dividends from IGM and Great-West Life as less our expenses, as the main driver of our dividends and other cash flows go into a bucket, which we then use to source the buybacks.
Speaker #3: Does that answer your question?
Speaker #4: Yeah, thank you. And then maybe you know, quite a different question just in terms of the capital allocation outlook for the business. Obviously, Empower and funding the organic and inorganic growth of the operating companies is something that's a top priority.
Speaker #4: But seeing some dislocations in other financial services I'm just wondering if there's any updated or refreshed view on let's say the verticals that you have in place today.
Speaker #4: might want to take that in the Versus maybe where you future.
Speaker #3: Well let me go to what I think our capital allocation priorities are and then try and tease out what the last part of that question is because I'm not totally clear on what it was.
Speaker #3: You were asking there Graham but from Great West Life perspective I think the US continues to be at the top of the list of capital priorities.
Speaker #3: Empower continues to grow its franchise. It continues to grow its market share in the DC business. And then the rollover opportunity into the wealth management business is really even an even stronger growth.
Speaker #3: And I didn't mention but Great West did point out that their wealth management Empower personal wealth across the 100 billion US mark in the last quarter if I bring you back to four and a half years ago it was 20 billion.
Speaker #3: jumped to 40 when they bought personal It capital which was combined with Empower personal wealth. But that's grown from that level up to 100 here.
Speaker #3: So that's tremendous. We're very pleased with the progress that that business is making. And if there were further opportunities to make acquisitions, that would be capital priority number one.
Speaker #3: We would look to grow across the Great West Life portfolio if we had synergistic transactions in any of the markets. We like the balance currently but if there were synergistic transactions we would do so.
Speaker #3: And there's some capital needed to grow the business, but most of their businesses are pretty capital light. So the position they find themselves in is that those earnings are generating a lot of cash and a lot of capital.
Speaker #3: And that's growing at the top of the house and notwithstanding the desire for acquisitions. They're not going to sit on a big big chunk of cash earning whatever it's earning in current rates.
Speaker #3: So that's why the buybacks are there. So that's a little bit I just tried to share with you how Great-West Life thinks about capital allocation.
Speaker #3: IGM from a McKinsey and IG Wealth not necessarily acquisition opportunities there but they do have their strategic portfolio and they've got some high growth businesses.
Speaker #3: So one could see over time some of those businesses requiring more capital. So that will be something that they would monitor in the strategic portfolio.
Speaker #3: But they also are building up strong cash now and have stepped up their buyback activity. So that's what's those two companies those are the capital priorities.
Speaker #3: And now if you could give me a little more clarity on the last part of your question there when you talked about other verticals I wasn't sure what you meant.
Speaker #2: Yeah, from like an opco perspective with Great-West and IGM, you know, life insurance, asset management, you know, it's a financial services business. Is that still the focus, or would you entertain other verticals, perhaps outside of those two?
Speaker #3: We're in the financial services business here and those I think I've explained what they would do. I think the priority would be in market transactions.
Speaker #3: Occasionally to get into new markets we have made investments. So you know Rockefeller was not a business that we were in. China asset management was not a business we were in.
Speaker #3: Those are brand new areas in financial services that in the past years we've made. And we've done those on a I would say on a disciplined step by step basis as opposed to jumping in with a lot of capital.
Speaker #3: So I'm you know it's would we ever entertain other areas the answer would be sure we would. But our priority is building around the franchises that we have.
Speaker #3: That would be the priority. But it would be financial services just very
Speaker #3: very clear.
Speaker #2: Of course.
Speaker #3: Graham. Thank you.
Speaker #2: Yeah Jake wants to add something here
Speaker #2: Graham. Sorry James.
Speaker #3: Sorry it's James my apologies. James just even you'll I don't know if the question's triggered by where our cash balance sit at 1.9 and available at 1.5.
Speaker #3: I'd say one of our unique characteristics or a competitive advantage at Power is just the willingness to take a long term view and approach to building the company.
Speaker #3: And so we won't, I don't think Jeff or myself feel cash burning in our pocket that has to be deployed, and it's not as obvious, but even during this year, we've had opportunities to deploy within the existing platform.
Speaker #3: So as part of the uni-just John transaction to maintain our ownership position we'll be allocating some capital towards that. Jeff's obviously mentioned earlier in his remarks we're going to be participating in the wealth we did participate in the wealth simple primary.
Speaker #3: So there are places where we can where we can allocate our capital towards at the end of the day within the existing footprint and not needing to go into necessarily new operating companies.
Speaker #3: So there are places where we can where we can allocate our capital towards at the end of the day within the existing footprint and not needing to go into necessarily new operating
Speaker #2: Thanks Jake. Appreciate that.
Speaker #3: But we are last point we are in the business of looking at opportunities. So you know we have what our priorities are but we get shown a lot of opportunities.
Speaker #3: So we'll continue to look at them of course.
Speaker #2: Okay. Great.
Speaker #2: Thanks. The next question is from Bart
Speaker #4: Starsky with RBC Capital Markets. Please go ahead. Pardon
Speaker #4: me. the.
Speaker #5: Just on
Speaker #4: Mr. Starsky your line is
Speaker #4: open. Can you
Speaker #5: hear me now?
Speaker #3: Hello Bart. Yeah we can hear you Okay.
Speaker #3: Bart.
Speaker #5: Great. Thanks. Sorry. Hey Jeff. Do you wanted to follow up on the NCIB question in terms of how you guys are thinking about that from a pacing perspective going forward.
Speaker #5: So you know 2.1 billion year to date that includes dividend but very healthy capital return and you obviously have some kind of intrinsic value model internally that you keep buying back stock because there's value embedded there.
Speaker #5: So should we expect that pacing to continue do you think it'll ramp up or.
Speaker #3: Yeah just in terms of our buyback activity we do look to the we are driving earnings and cash flow off the alternative asset management platforms over time.
Speaker #3: It's not kind of steady on some of those distributions but we create earnings there. We have some positive net cash flow from our dividends received less our expenses.
Speaker #3: So there's different sources of cash. We like to sit on some liquidity but we also don't want all that cash just to build up on an indefinite basis.
Speaker #3: So we jump into the market and we have been for the last four years in effect turning what are non-earning assets from a steady earnings point of view into contributing to EPS growth and dividend growth by shrinking the capital base.
Speaker #3: So if you think about that as a tool it's a tool to take some of the earnings from the non some of the distributions I should say from the non-earnings part of the portfolio the NAV and by shrinking the capital base and buying it back we are increasing our earnings per share and increasing our ability to pay dividends per share.
Speaker #3: I think I mentioned might have been before you picked up coverage somewhere in the last year I think I mentioned that we had because of the buybacks up until about a year ago I don't can't remember if it was three quarters or four quarters ago we had calculated we had about 72 73 million dollars of extra cash flow available to pay in dividends that we wouldn't have otherwise had had we not done the buybacks.
Speaker #3: So there's that's one way of thinking about our buybacks. Now the second part of your question I you know there's not a formula. Maybe Jake I'll ask you to comment on your own thoughts but we don't have a formula.
Speaker #3: to be in the market on a steady We like basis. We might ramp it up sometimes ramp it down. But our cash doesn't come in on a steady basis.
Speaker #3: It might come in all of a sudden we get a bunch of cash and we're not going to go out and kind of blow had a bunch of cash come in.
Speaker #3: We like to be in the market it all just because we just had a quarter where we on a steady basis.
Speaker #2: Jake anything you would add to my comments.
Speaker #3: Yeah Bart tactically how one way to think about it and we gave a bit of this guidance heading into 2025. There's probably right now about three layers to the buyback program.
Speaker #3: The first layer is Jeff alluded to we've been active for about four years now and roughly the same balance in the past few years of around 400 million of buyback activity.
Speaker #3: We obviously want to offset option dilution as well so that would be the second layer. And then with Great West announcing additional NCIB volumes both with their Q2 and Q3 results and our intention or communication around Q2 of participating in that that produces extra cash.
Speaker #3: And so that last piece is the one that we'll want to be thoughtful about how much of the buying we are any given day in the market but we obviously have that core 400 million plus offsetting dilution and then doing some additional activity on top of that with the proceeds from the NCIB.
Speaker #3: For Great West.
Speaker #5: Okay. Great. Got it. Thanks for that. And then on cigars. So you know we saw the nice tick up in the wealth simple valuation Q1 Q I think up 50% on your LP.
Speaker #5: Would that drive a fair value increase at cigar? I think it was flat if I'm not mistaken. And then cigar also announced the uni-just John so you know another positive transaction.
Speaker #5: Like would the should the market have increased or and if not what would drive maybe factors
Speaker #5: going the other way? Yeah let me take
Speaker #3: That Jake. Yeah, we don't, as I know, upfront Wealthsimple will... you may have missed it, Bart, we don't take it through the P&L.
Speaker #3: It has increased our NAV in the quarter and that's been reflected. In terms of uni-just John that's scheduled to close in the first half of 2026.
Speaker #3: Obviously we announced it during the quarter and wanted to raise it on the call. We expect once it closes it will obviously we'll look at what that means for the valuation of cigar in due course and where the business has traveled between now and closing and make an assessment of its value at that point.
Speaker #2: And just to underline the wealth simple position again we consolidate it. We do own more than 50% across the group. We own more than 50% of the outstanding shares at wealth simple.
Speaker #2: Principally at IGM and at Power Corp. We consolidate it so we don't market up when there's an increase in the value. What we do get though as a present is there's some carry that the cigar team has on overseeing that position.
Speaker #2: So we flow through the negative impact of the compensation carry in our P&L but not the markup. So the more wealth simple goes up in value you know the more losses we report.
Speaker #3: And you can I'm not going to make a comment about the accounting industry at all because that wouldn't be fair but it is a bit ironic here is this the more the thing goes up the more we report losses but that's just the way it is.
Speaker #3: Economically obviously we're very very pleased with the NAV growth.
Speaker #5: Yeah. Okay. So because that's what I was asking because there's an expense that goes through and you would think the GP cigar gets a benefit from the higher value which ultimately drives higher future carry.
Speaker #5: So is it a wash on the valuation of the GP or am I missing something?
Speaker #3: We don't value the GP every quarter Bart but you're right they're accrued carried interest has increased but it's not a mark it's not like Great West or IGM where we're
Speaker #3: marking it every quarter. We don't mark it
Speaker #2: up but there is a liability that goes through the compensation because there's a share of that carry that obviously goes to the cigar management team.
Speaker #2: So that we show through a liability but all the increase in the carry and the increase in the capital that we have in wealth simple does not get marked up.
Speaker #2: All that gets marked up is the employee's share the manager's cigar share of the
Speaker #2: carry. Yeah.
Speaker #5: Okay. Yeah because it is a positive for the GP. Yeah. All righty. And then just
Speaker #3: Yeah.
Speaker #5: on the GBL transaction they looks like they did a secondary with Carlisle and I think it's like a 9% discount to NAV. So GBL earlier this year announced that they took a stake in cigar plus they committed to future funds and then I think as part of this transaction with Carlisle they exited some of the cigar positions.
Speaker #5: So, is that a change in strategy by GBL with regards to its commitment to cigars, or is something else driving this?
Speaker #2: They did not dispose of their position in Cigar, nor have they, and they continue to be committed to the product.
Speaker #2: So that has not changed. I'm not sure so just correct you on that one. And second the transaction to dispose of the positions in the GBL capital was through various transactions to different buyers.
Speaker #2: I'm not going to comment on who they are but it was not you may have become aware of one piece of it but there were multiple transactions to multiple buyers that they announced.
Speaker #5: Okay. Okay. Thanks for the clarification. Thanks guys and thanks for the enhanced disclosure this quarter with the subpac. Really appreciate it.
Speaker #2: Perfect. Thanks Bart.
Speaker #1: We have a follow-up from Graham Riding with TV Securities. Please go
Speaker #1: ahead. Hi Graham.
Speaker #2: Yeah. Sorry. I was on mute there. Apologies. The follow-up question just on the buybacks at Great West. So is it reasonable to assume that if there's no sort of obvious inorganic opportunity for Great West that they will continue to be active on buybacks and should we also then assume that you're going to continue to look to participate in future NCIBs to sort of maintain your ownership
Speaker #2: position? Yeah.
Speaker #3: That would be my expectation. With the current business mix that they have as they grow they're creating more cash than they're putting capital back in or they are putting another way the earnings are turning into a lot of cash generation.
Speaker #3: And I think just building up that cash is not a very attractive alternative. And so if there weren't inorganic opportunities I think it and I think it's reasonable to assume they'd continue to do buybacks.
Speaker #3: I mean, those are decisions we'll make in the future, but that would be a reasonable assumption. The background on our participating, I'll just restate it.
Speaker #3: You probably know it. Initially we didn't we said we're not interested in selling Great West Life shares. They came to us and said you know like we would be great rather than us going out and trying to buy all of this from the market.
Speaker #3: And also shrinking our outstanding we'd like to grow our float not at the market value of our float not shrink it. And so would you participate pro rata when you think about it you're still basically you're getting cash back and you're still taking in 68 or roughly 68% of the earnings and the dividends.
Speaker #3: So it doesn't really change anything and it'll help grow our earnings per share and give a constant payout ratio that'll translate into higher dividends higher earnings.
Speaker #3: So it would be great if you could support us in this. With our objectives so we took that back and after considering it we decided all right that makes sense we'll participate pro rata so I don't see that changing at this point Graham.
Speaker #3: So I think you're the answer to your question is yes, that's a reasonable assumption both on continued buybacks and our participation. But obviously, we'll make those decisions through.
Speaker #3: So I think you're the answer to your question is yes that's a reasonable assumption both on continued buybacks and our participation but obviously we'll make those decisions through time.
Speaker #2: Yeah. Okay. Makes sense. That's it for me. Thanks.
Speaker #1: The next question is from Doug Young with Desjardins Capital Markets. Please go
Speaker #1: ahead. Good morning.
Speaker #6: Sorry I got on the call late so these are repeated I apologize but I want to kind of continue with the buyback question that Graham just asked but a bit differently.
Speaker #6: What are the limits on the amount that Great West can buy back and Power can buy back? What are the constraints given I mean you own 70% of Power sorry 70% of Great West.
Speaker #6: There's a limited float and that becomes a challenge for some people then when they look at the structure. So just how do you think about that?
Speaker #3: it up in terms of our participation went to the issue of float. And it's a trade-off because if you sit on as Great West Life if you sit on too much cash earning 2% or whatever you're earning you're not going to have your earnings grow as quickly.
Speaker #3: You're not going to have your ROE go up as quickly. You've got too much lazy capital so all things being equal your share price is going to drop or not grow as fast is a better way to put it.
Speaker #3: All things being equal if you're growing the business. So the number of shares is one part of the float but times the share price is how you get to the size of the float.
Speaker #3: And so as they're shrinking their share base they're increasing their earnings per share which all things being equal is increasing the share price might even get reflected in a higher multiple over time.
Speaker #3: When you do that math, I think you get to saying we keep doing buybacks. And that's the page you're on, but that's the equation.
Speaker #3: Doesn't mean that you're buying shares back you're going to have a lower you're going to have a lower value of your float. In fact probably is going to be the
Speaker #3: opposite. Okay.
Speaker #6: So it doesn't sound like you see any limitations on either the power level because I mean Great West is sitting on over 4 or 5 billion dollars of excess cash that we can see plus what's in the US and then debt capacity.
Speaker #6: So there's a lot of capacity there left to continue.
Speaker #3: That That was their assessment and our assessment as well when they decided to jump into the buybacks. But obviously we'd love to do if we could get an opportunity to do an acquisition we'd love to do that and slow the buybacks down.
Speaker #3: That would be a good thing to announce if we could if we got that
Speaker #3: opportunity. Okay.
Speaker #6: And the second just obviously an impressive list of value creation changes last six years there's a laundry list. Some of it maybe was lower hanging fruit.
Speaker #6: Some of it was tougher to get at. And as you look out going forward, there's obviously Wells Simple creating value. Saggard is becoming more topical.
Speaker #6: What are you and the management team focused on? What's the next five years look like in terms of the buybacks? They are here, but what are some of the other items that you're kind of looking at?
Speaker #3: I won't get into specifics on what else we might look at. I would tell you just restate what we how we think about it.
Speaker #3: We have the bulk of our assets are in businesses that are currently leading franchises that are at a more mature stage. But growing nicely and producing a lot of earnings and cash flow.
Speaker #3: That would be Great West Portfolio, IG Wealth, McKinsey. But we also are very long-term focused. And so we have, through our fintech strategy that we launched in 2015, that gave rise to the position in Wealthsimple.
Speaker #3: Through IGM ultimately taking a position in Personal Capital which ended up getting acquired by Great West. Through acquisition of China Asset Management the Wells Simple piece itself.
Speaker #3: Through the opportunity to buy in Rockefeller. And then turning and saying we want to be part of the alternative asset management space through Saggard, Power Sustainable, Northleaf came to IGM.
Speaker #3: There's seven or eight examples in the last 10 years of the group putting in a limited amount of capital but meaningfully. It's still like 15%, 20% of the portfolio into investments that are going to not create earnings in the short term but looking five, seven, ten years out could be really meaningful contributors to value creation and ultimately to earnings.
Speaker #3: So we try and do a balance between supporting and investing and growing our current leading franchises but also seeding a portfolio of investments that as you look five, ten years down the road are going to be really meaningful contributors and they won't all turn out that way and they won't all work right.
Speaker #3: I mean when you're doing it you're buying into businesses at earlier stages higher risk there's higher potential. Some of them will decide to take control positions in others we may not.
Speaker #3: I'm not going to get into what we're going to do. I couldn't do that even if I wanted to Doug but I think that philosophy is important to understand and what's great right now is that I think for a period of time people were just kind of ignoring it and saying well come talk to me when you've got some evidence that that's working.
Speaker #3: But as some of these things have been held for a number of years they're coming to fruition and I think it's creating evidence of how much value that they can create and will create.
Speaker #3: And ultimately these businesses every business goes through a phase where if it grows quickly it's investing, investing, investing and at some point they turn into cash flow and earnings.
Speaker #3: And so I would expect that some of the assets that we have in these businesses right now and turn into a reflection of what our earnings power will be five years down the road or seven years down the road as they get to more mature phases.
Speaker #3: So, I don't know if I answered your question. That basically tells you what the approach to investment is, and that won't change, I don't think.
Speaker #6: No, I figured you weren't going to give me specifics but at least it's an interesting to hear you discuss and break out how you think about it.
Speaker #6: So, I appreciate the time. Thank you.
Speaker #3: Great. Thank you Doug.
Speaker #1: I don't have no further questions. I'd like to turn the conference back over to Mr. Steven Hunt for any closing
Speaker #1: remarks. Thank you for joining us today.
Speaker #3: Following the call a telephone replay will be available later this morning and the webcast will be archived on our website for one year. We look forward to our next update on Q4 results.
Speaker #3: This concludes the call and have a great
Speaker #3: day. Ladies and gentlemen, this